State radio said the non-Iranian firm would have 49 percent stake in the project. There are currently two mobile service providers in Iran - state-controlled Iran Telecommunication Company (ITC) and MTN Group, sub-Saharan Africa's biggest cellphone operator.

Like other Gulf Arab telecom firms, Etisalat has been snapping up assets worth billions of dollars in populous countries such as Egypt and Pakistan.

Abu Dhabi-listed Etisalat bid to tap a market with a mobile market penetration of less than 60 percent, where about half of the population of over 70 million people are under 25 years of age. Iran has over 28 million mobile phone users.